JOHN D. MAXWELL EDGAR L APPERSON A. L. RIKER JOHN S. CLARKE ROLLIN H. WHITE H. H. FRANKLIN CHARLES DURYEA CHARLES B. KING CHARLES CLIFTON ELWOOD HAYNES ALEXANDER WINTON THE DECORATION OF THE PIONEERS, JANUARY 6, 1925 In recognition of their services to the automobile industry during the first quarter century of its history, these men were decorated with silver medals at the Silver Anniversary Dinner of the National Automobile Chamber of Commerce. Their names were chosen from a list, supplied by the Smithsonian Institu- tion, of the Americans who had contributed the most to the mechanical development of the motor car. Included in the picture is Charles Clifton, who as president of the National Automobile Chamber of Commerce acted as host during the ceremony. Not in the picture, but decorated also, was R. E. Olds. IVN Hd 0 . I LSd II_ ■ `1 Fld 'Cr This book is dedicated to three men who have given counsel throughout its preparation: EDWIN F. GAY CHARLES CLIFTON WILLIAM E. METZGER COPYRIGHT, 1928, BY A. W. SHAW COMPANY PRINTED IN THE UNITED STATES OF AMERICA PREFACE THIS book attempts to trace the economic and com- mercial growth of the American automobile industry. Manufacturing methods and processes are discussed only as a background for the proper understanding of market and financial developments. A companion volume now in preparation will deal more fully with the history and problems of mechanical invention and factory organization. Because of the recency of most automotive develop- ments, there is little in print upon which one may draw. I have therefore obtained most of my data from the field—from companies, from individuals, and from trade associations. But in all cases, excepting where data were imparted to me in confidence, I have indi- cated my sources. The footnotes are all printed at the back of the book in order to free the text from a mass of details. The person who is interested, however, not merely in general conclusions and trends, but also in certain qualifications of statement and in the sources of various data, can readily find them either in the notes or in the appendices. The supporting data them- selves, for all charts, appear likewise in an appendix. It is here impossible specifically to express my thanks to each of the persons who have cooperated with me in gathering the materials for this book. A list of those who have contributed data, through interviews or PREFACE vii vi THE AUTOMOBILE INDUSTRY But most of all, I am grateful for the generous advice otherwise, is printed on pages 329 ff. But I have to thank and guidance of Professor Edwin F. Gay, of Harvard especially, among the men of the industry, Mr. Wil- University, and for the constant aid of my wife. liam E. Metzger, of Detroit, Colonel Charles Clifton, of Buffalo, Mr. Roy D. Chapin, of Detroit, Mr. J. Newton RALPH C. EPSTEIN Gunn, of New York City, and Mr. W. A. Brush, of The University of Buffalo September 19, 1927 Detroit. Likewise, for their fullest cooperation, I am indebted to the members of the Board of Directors of the National Automobile Chamber of Commerce; to Mr. Alfred Reeves, the Chamber's general manager; and to Messrs. 0. P. Pearson, Robert A. Brannigan, John C. Long, W. I. Powlison, and G. C. Arvedson, also of that organization. I wish also to record the courtesy of Mr. Howard E. Coffin, who opened to me his private library in Detroit. Both to the Committee on Sheldon Traveling Fellow- ship, of Harvard University, and to the Committee on Aid to Research, of the American Council of Learned Societies, I am indebted for the award of grants which defrayed a considerable portion of the expense con- nected with obtaining data from the field. Either for various sundry courtesies or for reading parts of the manuscript, I may also thank Professors F. W. Taussig and Homer B. Vanderblue, of Harvard, and Professor W. L. Crum, of Stanford University; Professor Lawrence H. Seltzer, of the College of the City of Detroit; my colleagues, Dean C. S. Marsh, Pro fessor Oliver C. Lockhart, Professor Julius W. Pratt, and Mr. Barnet Nover; my friends, Messrs. S. A. Stephens and Volney Parker. CONTENTS PREFACE V I AN EPOCH IN TRANSPORTATION 3 1. The Significance of Automotive Transportation 3 2. Effects upon Rural Life 7 3. Other Influences upon Rural Life 12 4. Changes in Metropolitan Organization 14 5. The Development of Post Roads 17 6. The Motor's General Social Influence 19 II THE EVOLUTION OF MASS PRODUCTION 23 I. Manufacturing Proficiency and Commercial Devel- opment 23 2. Invention and Early Construction 24 3. Rapid Development of Manufacture . 28 4. Historical Basis of Present-Day Methods of Produc- tion 33 5. Early Productive Organization 37 6. Development of Standardization in Chassis Parts 41 7. Development of Internal Plant Economies . 43 8. External versus Internal Economies so III GROWTH OF THE MARKET, 1903-1916 55 1. The Basis of Consumer Demand 55 2. Consumer Demand and Price Determination 62 3. General Growth in Market Demand 65 4. Character of Market Demand 71 ix x THE AUTOMOBILE INDUSTRY CONTENTS xi 5. The Underlying Causes of Demand. Changes . 77 3. Summary of Movements from Group to Group; Ex- 6. Saturation of the High-Priced Car Market . 93 ceptional Cases 199 7. Summary: Market Development through 1916 . 99 4. Movements between Production Groups, 1917-1926 202 5. Movements of Conspicuous Leaders Relative to Each Iv Other, 1903-1924 204 Causes of Changes in Leadership 208 MARKET DEVELOPMENT, 1917-1926 102 6. 1. General Characteristics of the Period 102 VIII 2. The Self-Starter, the Cord Tire, and Other Refine- ments 105 CONCENTRATION AND COMBINATION; MANUFACTURERS' AS- 3. The Rise of the Closed Car 110 SOCIATIONS 213 4. Introduction of Installment Sales 115 I. The Scale of Production 213 5. Production by Cylinder and Price Classes . 122 2. Combinations in the Industry's History 2 18 3. The Association of Licensed Automobile Manufac- V turers 227 METHODS OF MARKET DISTRIBUTION 132 4. The National Automobile Chamber of Commerce 235 r. Retail and Wholesale Distributive Channels . 132 IX 2. Characteristics of Distribution Through Dealers . 136 3. Marketing Cooperation and Control by the Factory 144 THE FORTUNES OF LEADING PRODUCERS 240 4. Speed Competitions and Reliability Contests . 152 r. The Net Incomes of Ford, Reo, and Packard, 1905- 5. Technical Contributions from the Early Tours . 157 1926 240 2. The Earnings of Six Other Companies 247 VI 3. The Level of Profits as Represented by Nine to Fif- teen Large Concerns 252 THE ENTRANCE AND EXIT OF FIRMS, 1903-1926 . 162 4. The Nature of Profits in a New Industry . 257 1. The Shifting Personnel of Particular Industries . 162 2. The Length of Life of Companies and the Causes X of Failure i68 3. Failures Year by Year '74 MARKET STABILIZATION AND INDUSTRIAL MATURITY . 266 4. Causes of Changing Rates of Failure i8o 1. Stabilization of Demand and the Replacement Mar- 5. Average Life of Firms Leaving the Industry . i88 ket 266 2. Relation Between the New Car and Used Car Mar- VII kets 268 THE RISE AND FALL OF FIRMS, 1903-1926 193 3. The Export Market 271 4. The Importance of Marketing Policy 276 1. The Relative Movements of Specific Firms . 193 2. Movements Between Production Groups, 1903-1916 194 NOTES 287 xii THE AUTOMOBILE INDUSTRY APPENDICES A. GENERAL STATISTICS OF AUTOMOTIVE MANUFACTURE, MARKET DISTRIBUTION, AND FINANCE 313 ILLUSTRATIONS r. Production and Value of Product 314 2. Invested Capital, Employment, and Wages . 316 The decoration of the pioneers, January 6, 1925, Frontispiece 3. Registration of Motor Vehicles 317 4. World Trade, World Production, and World Regis- r. Title page of the first number of the Horseless Age, November, 1895 tration 319 5 5. Installment Sales: Financial Figures and Ratios . 322 2. Number of persons per passenger automobile, in the 6. Financial and Other Statistics: Ford Motor Com- various states, as of January r, 1927 13 pany and General Motors Corporation . 323 3a. A main highway in New York State, near Buffalo, B. SOURCES AND SUPPORTING DATA 329 in 1912 21 1. List of Acknowledgements to Individuals . 329 3 b . A typical New York State road, near Buffalo, in 1927. 21 2. Data of Charts and Tables 334 4. Four early gasoline automobiles of 1893-1899 and their builders 29 C. HISTORICAL MATERIALS; LISTS OF COMPANIES, ASSOCIA- TIONS, AND TRADE JOURNALS 361 5. Assembly methods before and after 1912 . 32 r. Articles of Agreement of the Association of Licensed 6. The Olds Motor Works in 1903 38 Automobile Manufacturers 361 2.. Agreement Executed between the Electric Vehicle 7. Four of the leaders in the development of automotive Company and the Winton Motor Carriage Com- standardization 42 pany 371 8. Four years of machinery and manufacturing methods 3. Racing Records . 375 adopted since 1912 45 4. List of Passenger Automobile Manufacturing Com- 9. The difference of two decades 48 panies, 1895-1927 377 5. Lists of Truck, Bus, and Taxicab Manufacturers as ro. The celebrated curved-dash Oldsmobile 56 of January r, 1927 382 r. Four heavy cars of 1906-1908 78 6. Trade and Technical Journals 385 7. List of Automotive Trade Associations, 1927 . 385 12. Various mechanical designs of 1903-1907 88 13. William E. Metzger 95 391 INDEX 14. The evolution of the closed car 113 is. A salesroom of 1899 138 16. A New York City automobile "salon," 1926 141 17. The first American automobile show held in Madison Square Garden, New York City, in 1900, and the xiv THE AUTOMOBILE INDUSTRY thirteenth annual exhibition held in the same build- ing 12 years later 153 18.